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MBAC stock surges on loan maturity extensions, liquidity update

22nd October 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The TSX-listed stock of Brazil-focused fertiliser producer MBAC Fertilizer on Wednesday jumped by as much as 157%, or C$0.11, after the struggling company reported that it had signed final agreements with its senior lenders to extend the maturity of its loans and defer related interest and principal repayments for up to two years.

The company had been struggling with lower-than-expected working capital levels, restricting it to buy consumables and spare parts, which caused interruptions, delays and operational inefficiencies.

These setbacks climaxed in a slower-than-expected ramp-up and reduced output at its flagship Itafós mine, resulting in the company being unable to declare commercial production, originally pencilled in for the second quarter.

MBAC noted that the loans were originally incurred to build the company's Itafós operations and start single super phosphate (SSP) production.

"Signing final agreements in connection with our debt extension with our senior lenders is important on a number of levels.

“We believe it demonstrates a strong level of support within the financial community for Brazil's agriculture fundamentals as well as for our prospects for becoming a significant fertiliser producer. In addition, it enables management to focus more attention and effort on strategic initiatives that will help accelerate our production ramp-up, [improve the efficiency of] operations and identify strategic partners,” MBAC president and CEO Cristiano Melcher said.

Under terms of the final agreements, the company would be allowed to defer repaying principal and interest amounts until September 15, 2016, outlined in the final senior debt extension, which included an extension of the current maturity dates of the existing working capital facilities by up to four years.

Interest rates would remain the same and the company had the funds required to maintain the debt service reserve accounts, which would not require replenishment until 2016.

The company said it would continue to examine and implement initiatives to deal with its near-term liquidity issues and had received indications from its senior lenders for additional working capital facilities of about $6.7-million. Gross proceeds from these funds would be used to buy supplies, spare parts and phosphate rock from third-party suppliers.

“The initiative to buy third-party concentrate provides a number of short-term benefits. In a period of intense ramp-up, third-party concentrate allows us to [improve the efficiency of] our industrial facilities, lower the consumption of certain consumables and take advantage of the advanced stage of ramp-up of certain of our plants.

“We expect to be able to produce more granulated SSP immediately, improving our cash flow generation,” Melcher pointed out.

MBAC’s TSX-listed stock closed the day up 115.38% at C$0.14. The stock had lost 95% of its value since the start of the year.

Edited by Creamer Media Reporter

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